Aside from the usual worries about massive layoffs, foreclosures and a tumbling stock market, what appears to be a looming recession is presenting another kind of personal dilemma:
How much should we tell our children about the gloom and doom, and how can we best prepare them to face the economic monster in the closet when they grow up?
Explaining your family's financial situation and giving your kids responsibility early on can help promote confidence and an ingrained understanding of the money cycle. And don't be afraid to encourage creativity. Developing entrepreneurial traits often begins with inspiration at home.
Have the money talkSigns of an economic downturn may be an adult worry, but it doesn't mean your kids should be left out of the picture when it comes to talking about finances. Though the discussion may vary depending on the age of your children, the topic isn't any less important for the elementary school set.
"Parents generally don't want to bother their kids with their whole money situation," says Elisabeth Donati, the founder and executive director of Creative Wealth International, a Santa Barbara, Calif., organization that runs camps and programs to teach kids (and their parents) about money. "Then parents wonder why when their kids leave the house and they hand them a checkbook that they don't know what to do with it."
From the time they start elementary school, show your kids your pay stubs and bills to help them conceptualize where money comes from and how it is spent, Donati suggests. You can even have them watch when you write checks and pay bills online.
If you have teenage kids, chances are they're hearing the word "recession" a lot lately, but they might not know exactly what it means.
"Start by explaining to (your teens) why the economy is in this position," says Gabe Graumann, an entrepreneur who writes Money Talk With Gabe, a financial-coaching blog. "A lot of teens don't understand how credit works," he adds, but you can "educate them that when you borrow money there's interest that you pay to someone else, that's a risk you're taking and there is liability attached."
Lead by exampleInvolving kids in daily finances can help them gain an intuitive sense of basic economics, not to mention make your own daily routines with bills and balances more appealing. If rising costs during a recession prompt you to clip out coupons for the grocery store and make creative use of cheaper ingredients, you might want to use the opportunity to demonstrate budgeting to your children.
Karen Hoxmeier, the founder of MyBargainBuddy.com, a discount-tracking service, says her three children get a kick out of comparing prices on cereal boxes and finding good deals on produce. "They look at it like a scavenger hunt, and they compete with each other," she says.
Dan Henderson, the founder and CEO of Summit Products, a Trussville, Ala., toy company, and a father of two daughters ages 18 and 21, says that when his children were growing up, he sent them allowances in check form and allotted himself checks for spending and family entertainment as well. The habit, he says, helped his daughters understand costs and limits.
Instead of agonizing over the bank account after the kids are asleep, parents should allow them to throw in their own votes on what luxuries the family could do without.
"Let's say you want to take a family vacation to Disneyland," says Jim Del Favero, a group product manager for Quicken personal-finance software. "Tell your kids that in order to go on a vacation, you need to save up. Ask them, 'What can we do as a family in the next three months to save up?' Give them a goal and help them participate in saving for that goal."
Encourage entrepreneurshipAnother way that children learn about money is by watching how their parents work and seeing what it takes to generate an income. Business owners can offer their kids firsthand knowledge and advice on how to start a small business and maybe even generate some of their own income.
On the most basic level, running a lemonade stand or selling baked goods in the neighborhood are popular and fun ways for kids to start thinking like entrepreneurs.
"You can challenge your kids to find other ways to make money," Del Favero says. "If you have a child who likes playing a musical instrument, maybe they can tutor other children. Train children to take the things that they are good at or like doing and see if they can find a way to generate revenue from it."
Seeing an idea through from start to finish is not only an excellent learning experience for children, but it also helps them get in the habit of thinking creatively and being innovative -- both useful skills to have in times of economic recession.
"Some of the best and most profitable times for entrepreneurial businesses is when the economy is in a slump," blogger Graumann says. "That's when the market is looking for new ideas and when you have an opportunity to create a new niche in an established industry."
Share your strugglesEvery career has trying moments. So rather than just sharing news of signing a big client or other successes, make a point to explain the whole process to your kids. Trust and openness can translate into entrepreneurial inspiration and financial confidence.
Summit Products' Henderson says he regrets not being more direct with his children during the financially difficult early years of his business. "We did a lot of things to shield my kids from that, and in retrospect, I really believe that that was a mistake," he says. "Kids don't need the worry of the world on them, but they also need to know that there are exterior things that happen to you that you have to deal with."
As Henderson's children got older and company profits picked up (Summit was named an Inc. 500 company in 2003), Henderson realized his mistake. Direct involvement became important, he says. His two daughters have earned extra money by helping clean Summit's offices and warehouses and doing other office tasks.
"I'm so encouraged when I see my own kids and how well they handle difficult situations because of that," he says.